Wheat First Union is reportedly trying to lure as many as seven BT Alex. Brown Inc. employees from its Institutional Sales division to build its own operations in Baltimore, according to sources familiar with the situation.
The Richmond-based brokerage and investment banking firm has made offers to a group of "institutional salesmen," but Alex. Brown officials have countered to prevent them from leaving, sources said.
Institutional salesmen are key players within investment banking companies, because they sell research material generated by the firm to brokerages, mutual funds and pension funds. They also organize "roadshows," where they market to potential investors the shares of companies that are about to go public.
The deal with Wheat, however, has not been completed, a source involved in the negotiations said.
"It's premature," he said. "Families are hard to break up."
A spokesman for Bankers Trust Corp., Alex. Brown's New York-based parent, said the seven are an "important part of our U.S. equities team. We believe they are still on board, and we hope they will be part of our team going forward."
Officials at Wheat declined to comment.
The seven, who have been approached by Wheat, include Mark McCulloh, Robert East and William Nolan, sources said. The names of the other four could not be determined.
If they leave, it would be another blow to Alex. Brown, which has lost several top executives in recent months, in addition to brokers, investment bankers and traders in the wake of Bankers Trust's acquisition of the firm 17 months ago.
"To have a team of seven go, it's bad from the spirit point of view," said a former Alex. Brown executive.
Analysts say Wheat's parent, Charlotte-based First Union Corp., is driving to build the brokerage firm's investment banking business, as well as its trading, research and institutional sales operations.
If Wheat is successful and hires the seven institutional salesmen, it would build its team to 35 people, up from 28.
"There has been a significant push to expand their capital markets capabilities across all sectors, so they are investing heavily in that business," said Vernon C. Plack, a bank analyst at Richmond-based Scott & Stringfellow.
Plack said the capital markets area, which includes debt underwriting, investment banking, and mergers and acquisitions, is important to First Union because it is a "high-return-on-equity business" if managed properly.
It generates millions of dollars in fee income each year and leaves the company less reliant on making money from loans, he said.
The Alex. Brown "salesmen may have significant or material relationships with accounts Wheat is currently not doing business with," Plack said. "It boils down to account penetration and looking for more clients."
The move would expand Wheat's presence in the mid-Atlantic and improve its chances of doing more business in Baltimore, Philadelphia and New York, said a securities trader at a competing firm in Baltimore.
"It [would be] a plus for Wheat," he said.
Departures at Alex. Brown haven't been wholesale, but the firm has lost a number of key players since the Bankers Trust acquisition. Those executives include W. Gar Richlin, head of investment banking; David L. Hopkins Jr., head of asset management; Donald R. Heacock, co-head of the private client division; Robert F. Price, head of Alex. Brown's legal department; and Beverly L. Wright, the chief financial officer.
Besides those top executives, a number of brokers, securities traders and investment bankers have gone to competing firms, such as Legg Mason Inc.; Morgan Stanley Dean Witter & Co.; and Ferris, Baker Watts Inc. Others have started firms, and three have become partners at San Francisco-based Thomas Weisel Partners, the newly formed investment banking firm.
Pub Date: 2/06/99